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Jerry Shenk


Work, Not Welfare, Provides Dignity

by Jerry Shenk
 

Any Introductory Economics student understands that the things you want more of you subsidize, what you want less of you tax. Since the mid-1960s, though, America has subsidized unwed mothers and illegitimate children, while taxing marriage.

Now the political class responsible for formulating and perpetuating both policies feigns surprise that America has more illegitimacy and fewer marriages. While cynically renouncing "income inequality," politicians continue programs intended to help the poor, but which make their lives worse, primarily by encouraging long-term, multi-generational dependency.

By penalizing marriage and subsidizing single motherhood, the welfare state creates incentives for people to choose short-term benefits which, longer-term, become personally destructive. Decrying "inequality" and a lack of "fairness" is much easier than addressing the underlying disincentives of public policy, and it allows policy-makers to deflect attention from the lousy results of social engineering and ignore their own failures.

Now, a study by economists Laurence Kotlikoff and Alan Auerbach reports that common measures of inequality ignore people's spending power: "The right measure is not how much wealth or income people have or receive but their spending power after the government has levied taxes on those resources and supplemented those resources with welfare and other benefits." The researchers calculated "lifetime spending inequality," and found inequality to be far smaller than imagined by social justice warriors who superficially contrast the "1% vs. 99%."

For example, the top 1 percent among 40- to 49-year-olds possesses 18.9 percent of the wealth but account for only 9.2 percent of spending. Those in the bottom 20 percent have only 2.1 percent of wealth but account for 6.9 percent of total spending. The economists explain: "[S]pending inequality is dramatically smaller than wealth inequality…"

"Democrats claim higher taxes on the rich and more benefits for the poor are the best ways to reduce inequality. Republicans argue [for] more growth, accomplished by lowering taxes to spur work and investment..."

As Kotlikoff's and Auerbach's research discloses, "Raising taxes and benefits…will come at the cost of even larger work disincentives. At the same time, cutting taxes and benefits…would improve work incentives…"

Their conclusion may sound heartless, but it reinforces a point on which Arthur C. Brooks elaborated in his book, "The Conservative Heart: How to Build a Fairer, Happier and More Prosperous America." Brooks observes that the political left's attempts to help the poor have failed for decades. Indeed, America's poverty rate remains virtually unchanged since Lyndon Johnson's Great Society institutionalized public welfare.

Work, Brooks writes, is the central solution to poverty: "Charity is important, but what [the] poor … really need is investment." Brooks encourages people to "see work as a blessing." When welfare recipients work for benefits, they are helped twice: "[T]hrough welfare, we…[help] to meet…immediate material needs. …[T]hrough work we…[help] them earn success — the key to a fulfilling and dignified life."

Welfare should be a temporary safety net, not a vocation. Work is the route out of poverty. A work component for receiving subsidies isn't heartless, it's compassionate and empowering.


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